Work, Disability, and Human Capital

April 22, 2017

To tell the truth, I don’t want a job. But since people are selfishly unwilling to give me food and shelter and clothing without something in return, I have to work. Lucky for me. In order to hold a job, I have to show up on time, get along with others, be organized, smile at clients, occasionally deal with difficult people. Because of working, I am better at prioritizing, setting goals, contributing to a team. I have to admit, working has made me a better person . . . which I often overlook when that bloody alarm clock rings at 6:00 AM.

Having to work creates incentives to improve and develop one’s “Human Capital.” Human Capital is the stock of a person’s knowledge, habits, social and personal attitudes. It is the sum of a person’s tools for thriving.

Success at work involves the same characteristics, the same sort of Human Capital, needed for success in other areas of life. Human Capital is more important than capital. As Susan Mayer argues in her book What Money Can’t Buy, “The parental characteristics that employers value and are willing to pay for, such as skills, diligence, honesty, good health, and reliability, also improve children’s life chances, independent of their effect on parents’ incomes. Children of parents with these attributes do well even if their parents do not have much income.”

Sometime government assistance can entice people away from work. A recent article by Terrence McCoy, Disabled, or Just Desperate? enters the world of an Alabama man, Desmond Spencer, an unemployed roofer with a bad knee. Out of work for a year, he is surrounded by family members receiving Social Security disability benefits – his parents bring in a combined $3,616 per month – and their days are spent at home, smoking cigarettes, drinking sodas (his girlfriend, also on disability, drinks up to 24 cans of Mountain Dew a day). The family is pressuring Spencer to apply for disability benefits. “You’re a grown man, his stepfather said. Bring in some money.” Spencer finally calls the Social Security Administration and starts the application process. A few days later finds him spending a morning in his pajamas, watching television, then burning some trash in the back yard. The article ends: “It was 1 in the afternoon. The day already felt over.”

It is easy to sympathize with Spencer. It is also easy to foresee his future. On disability, he will have no incentive to develop any skills or talents. Earlier he had applied for a welding class, but failed the math requirements. What are the chances now of him boning up on the math and trying again? He will join his family, and leave his potential, his Human Capital, undeveloped. That is the tragedy of the story.

Social Security Disability needs reform. Currently the US government spends $192 billion each year on disability payments — more than the combined total for food stamps, welfare, housing subsidies and unemployment assistance. In 1960, there were 455,000 people receiving Social Security Disability Insurance. By 2015, while the population of the US had increased 80% (179 million to 320 million) the number of people receiving disability had increased 2,757%, to 13 million. This increase cannot be explained by worse health, since there have been significant improvements in health care. And it certainly can’t be explained by more rigorous work, since there has been a decrease in the physical demands of most work, thanks to automation and the growth in service/information jobs. Clearly, millions of people who could work are, like Desmond Spencer, being drawn away from the working world by the siren song of government assistance.

Changing Social Security Disability will be difficult. After President Bill Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 – the “Welfare Reform Act” – there was much hysteria. Peter Edelman resigned from the Clinton administration in protest, arguing that millions would drop into poverty, and there were apocalyptic predictions of thousands of hungry children sleeping on street-grates.

Some people are truly disabled and need help. Social Security Disability is designed for them. But too many people who can work are succumbing to the disability temptation and opting out of work. The lost productivity hurts the economy. And it is unfair to force taxpayers to support people who could support themselves. But even more tragic is the waste of human potential. If a person can work, they should. They will be better off as a result.

Comments

Good article, Jeff!
Would like to hear your ideas for improving the situation.
Isn’t much of the issue a lack of jobs? Disability rates have increased the most where there are the least jobs. It sounds like Desmond Spencer would rather work, but disability is one of very few options, none of them good.
There are some proposed solutions: https://www.cbo.gov/publication/43432